Dell Technologies (DELL) is on the cusp of a $5 billion deal to provide servers optimized for artificial intelligence. Reports indicate the company will provide Elon Musk’s AI startup, xAI, with servers powered by Nvidia Corp GB200 semiconductors. Considering there have been calls for developing cost-effective AI models, it would be a significant deal.
$5B Server Deal
The $5 billion deal underscores the growing demand for computing power to enable artificial intelligence workloads. Although the effect on profitability is unclear, the agreement with xAI “would firmly establish Dell as a leading AI-server provider and boost sales. On the other hand, xAI is to gain access to significant computing power to support its AI-powered chatbot Grok, which is accessible to paying users of X.
While xAI is the latest company to affirm demand for computing to power AI workloads, Tesla has also been at the forefront in fuelling the demand. xAI has already leveraged a combination of Dell and Super Micro servers as part of its supercomputer project in Memphis.
Last year, Dell deployed tens of thousands of graphics processing units as it continues to strengthen its server unit to address the ever-growing demand amid the AI boom. According to analysts, Dell shipped over $10 billion worth of AI servers in the fiscal year that ended last month. By the fiscal year that ends in January 2026, that amount is expected to rise to $14 billion.
Meanwhile, Apple (AAPL) is to leverage Alibaba Group’s (BABA) artificial intelligence technology on iPhones in China. The multibillion-dollar strengthens Alibaba’s push to gain a foothold in China’s fiercely competitive domestic market, given the status of Apple as a key customer. Due to laws requiring it to collaborate with a locally recognized business, Apple has not yet made its entire suite of AI features available in China.
The deal with Alibaba comes on the heels of reports that the company plans to incorporate Apple Intelligence into its Vision Pro headset to bolster its interest. Standard features like the Image Playground app, Genmojis, and the Writing Tools interface will be part of Apple Intelligence on the Vision Pro. Apple is extending its artificial intelligence capabilities beyond the iPhone, iPad, and Mac for the first time. The headset can support on-device AI processing because it has a Mac M2 chip and 16 gigabytes of memory.
Baidu AI Boost
Separately, Baidu (BIDU) delivered better-than-expected results characterized by a small revenue drop, consequently alleviating fears that its internet search and artificial intelligence businesses face an uncertain future amid heightened competition.
Revenue for the three months ended December was down by 2%. On the other hand, net income increased to 5.2 billion yuan, compared to the 3.92 billion yuan that analysts expected. The Chinese search giant faces significant challenges in the country’s burgeoning internet landscape.
First, despite the economic downturn, search is losing market share and advertising dollars to social apps like Xiaohongshu and Douyin. In a bid to counter the slowdown, the Chinese internet giant has been investing in AI to bolster its products and services.
It has already started commercializing its ChatGPT-style Ernie, which costs $8 a month to use, and was the first of its kind in China to release large language models to the general public. After making the app free, users are getting their money back. It has also collaborated with Apple Inc. to develop features like image search for the iPhone’s AI system.
